MARKET ANALYSIS
JOHN TREHARNE CEO, The Gym Group
RAY ALGAR MD, Oxygen Consulting
“Loss leading has a patchy record, especially where
lack of investment and strategic focus can be a concern in the long run”
T
he entry of new competition keeps us all on our toes, and anything that increases
accessibility to health and fitness is to be welcomed – after all, it’s what The Gym pioneered. That said, it’s understandable
that the market will wait to see what the product offering is, and whether the price is real, before reacting. Loss leading has a patchy record, especially where lack of investment and strategic focus can be a concern in the long run. A few other questions on the
strategy are also immediately clear. Will high quality staff engage with the product if they perceive their value-add isn’t recognised when it’s sold at a loss? How will customers react to the hard sell of being a retailer’s warm leads? Will consumers be able to square their expectation of customer service in the gym environment with the mass-market, low-cost retail service experience? But of course, if £5 really is to be
the new low-cost price fl oor, then the mid-market bracket just got redefi ned. Those already struggling to deliver value in this space could be hurt further, with other operators currently positioned as ‘budget’ being left in no-man’s land.
landscape since 1982, the same year that David Lloyd opened his first club. Its core business I fully understand: through its 418 UK stores (at April 2014) and direct ownership of brands such as Slazenger, Lonsdale and Everlast, it offers a treasure chest of sports bargains with up to 70 per cent discounts. However, its strategy for the health club sector seems incoherent. Having entered the health club market
S
in June of this year with the acquisition of its fi rst LA fi tness site, I can currently buy a full membership at its Sale club for £35 a month, with no contract, while the most frequently used price is £36 a month across the 18 purchased clubs it now operates. The site in Aintree, Liverpool, is its fi rst purpose-designed hybrid retail store and gym, but the £5
ports Direct has been a successful part of the British sports retailing
membership fee – which has generated signifi cant press interest – is a limited offer promotional price, subject to a 12-month contract, £10 joining fee and missed payment fees. There has been
speculation Sports Direct will also embed gyms into some of its existing stores. This means it may be pursuing three distinct club formats at different price points, which feels as jumbled as its retail stores. My sense is the company wants to compete in the mid-market, but the Liverpool site sends a mixed message. Sports Direct has enormous scale
and infl uence and I would like to more clearly understand the big idea driving this new project, and how it intends to create a remarkable consumer experience that will support more people to become more active.
TIM BAKER Research director, Touchstone Partners
T
he Sports Direct move into the low-cost gym sector is a potential game changer, with three key factors in its favour: using existing, known sites means there’s already an opportunity to win back those who left LA fitness on cost grounds; embedding the gyms within
retail stores gives the best opportunity to upsell; and, of course, the genius that is Mike Ashley. But at £5 a month, this is perilously close to – or even over – the fi nancial edge. Also weighing against the venture is the probability that, even though they will likely have to walk through the store to get to the gym, members are unlikely to want to buy something each time they visit. This may be critical to long-term success. Promising a higher level of service and
layout than is often found in low-cost gyms, it will be interesting to see where Sports Direct Fitness is this time next year. If this were being done by anyone other than Mr Ashley, I wouldn’t expect to see it still here this time next year. I wouldn’t like to bet either way just yet.
“If this were being done by anyone other than Mr Ashley, I wouldn’t expect to see it still here this time next year”
40 Read Health Club Management online at
healthclubmanagement.co.uk/digital January 2015 © Cybertrek 2015
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